Heritage Foundation is wrong about welfare state

Commentary: Caring for each other is not a sign of social collapse

WASHINGTON (MarketWatch) — The Heritage Foundation is out with another one of its misleading reports about how big government is eroding our freedoms.

The report — The 2012 Index of Dependency on Government — comes to the predictable conclusion that the nation is perilously close to “economic and social collapse” because too many of us are overly reliant upon the government for our survival. Read more about the report at Heritage.org.

The report states ominously that dependence upon on the government increased 8.1% in 2010 after a 13.8% leap in 2009. More than 67 million Americans — 21.8% of the population — are dependent on the government, the report says.

“Perhaps the greatest danger is that the swelling ranks of Americans who enjoy government services and benefits for which they pay few or no taxes will lead to a spreading sense of entitlement that is simply incompatible with self-government,” said William Beach and Patrick Tyrrell, who wrote the report for the Center for Data Analysis at the Heritage Foundation. The Heritage Foundation is a self-described conservative think tank in Washington that promotes smaller government and freedom.

This chart, reproduced from the Heritage Foundation’s report, shows that the percentage of Americans who are “dependent” on government programs has increased to 21.8%. That’s up sharply from 2007, but not much different from levels that prevailed in the 1980s.

The report is alarmist in tone, but the actual data underlying the analysis don’t support the doomsday rhetoric.

A chart buried deep in the report tells the tale of how off-base this report really is. Chart 12 (reproduced at the left) shows that the percentage of Americans who are “dependent” upon government (21.8%) has changed very little over the past 30 years. It’s up a little now because of the recession and the increased proportion of retirees, but it’s lower now than it was in 1993 (23.1%) and not much higher than the levels that prevailed during Ronald Reagan’s presidency, when it averaged 21.4%.

The researchers seem to be surprised that an increasing number of baby boomers are retiring and are now collecting the benefits that they earned and paid for over a lifetime of working. They are equally surprised and dismayed that the worst recession in more than 70 years means that millions of people who have been thrown out of their jobs are now collecting the unemployment insurance that they earned and paid for over a lifetime of working.

The researchers seem shocked that “the nation spends more on welfare than on national defense.” Indeed. What kind of country spends more on helping its own people than it does on killing its enemies?

What’s worse, the index is constructed in a way that it simultaneously exaggerates the dependency of some people — students, the elderly, homeowners — while also ignoring large and expensive government programs that subsidize other people — mostly the upper middle class and the wealthy.

What kind of country spends more on helping its own people than it does on killing its enemies?

How can we take this index seriously when it counts every homeowner whose mortgage is insured by Fannie Mae or Freddie Mac as “dependent” on the charity of the government but ignores the millions of homeowners who take the mortgage-interest deduction on their taxes? Both groups get federal subsidies for their housing, but only one group is counted as dependent — and it’s not the group that receives the largest subsidy.

The index counts the money spent providing health care under Medicare and Medicaid, but ignores the hundreds of billions in tax subsidies given (mostly to the middle class) for their health spending and health insurance.

The index counts students who have taken out federal student loans as “dependent,” but not students who borrow money from the private sector. And the millions of K-12 students who go to public schools aren’t counted at all, because this index of “government dependency” doesn’t count state or local government spending at all.

The index counts the corporate welfare given to agriculture, but ignores all the other corporate welfare — from the too-big-to-fail banks to the defense contractors and beyond.

So we’re left with an index that is curiously arbitrary about what counts as “dependent” and what doesn’t.

Am I dependent upon the government if the police and military protect my property and life? Heritage says no. Am I dependent upon government if I drink clean water, eat untainted food, or breath nonpoisonous air? Heritage says no. Am I dependent upon government if the tax code allows me to inherit wealth and never pay any capital gains taxes? Heritage says no.

Given all the things that government does, I don’t think 21.8% of the population is dependent upon the government; I think it’s closer to 100%.

Heritage is irked by the expansion of the welfare state. It pines for the days when “a person in need depended on help from people and organizations in his or her local community.” Unfortunately for Heritage, the people of this country seem to prefer Social Security to living out their golden years in the almshouse.

Nobody wants spending on unemployment benefits, food stamps, or welfare benefits to go up endlessly, but shouldn’t we be thankful that people in need aren’t forced to beg on the streets as they did in the 1930s?

It’s absurd to say, as Heritage does, that society is divided into two groups: Those who work hard; and those who sit around and collect benefits. Over the course of a lifetime, almost everyone works hard, pays taxes and receives the benefits of living in an advanced and enlightened society.

Rex
Nutting

Rex Nutting is a columnist and MarketWatch's international commentary editor, based in Washington. Follow him on Twitter @RexNutting.

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